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Modest growth in US water industry

In its annual Water Partnerships Report*, Public Works Financing assesses the state of the US water and wastewater services industry.

The country’s six largest water and wastewater firms now operate, maintain, and/or manage 720 water facilities and 939 wastewater facilities in 1,319 municipalities.

PWF describes “organic growth” in the industry over the last dozen years. For that period, it counts 387 new contracts involving the private operation, maintenance and/or management of publicly owned water and wastewater facilities, in addition to 27 contracts involving the private design, construction, and operation of public facilities.

Contract renewal rates suggest that contracting out water services remains popular with municipalities. Veolia Water North America, the operator with the largest market share, reported a renewal rate of 94 percent in 2011, up from 92 percent the year before.

That said, renewal rates for contracts that were contested (either by competing operators or by municipal unions) were lower, and more contracts reverted to municipalities in 2011 than in previous years. Four firms held 147 contracts that came up for competitive renewal in 2011. Of those contracts, 56 percent were renewed with the incumbent service providers, and 8 percent went to private competitors. Eighteen percent of the contracts reverted to municipalities.

The Water Partnerships Report also includes commentary by water executives on the state of the industry. Several note the increasing interest in non-traditional contracts involving either more or less than typical operations and maintenance agreements. Some municipalities are seeking private partners not to operate facilities but instead to recommend operating efficiencies or to help plan capital improvements. Others are looking at more complex arrangements, such as long-term leases of their water utility assets, concessions, or other means to attract private investment in water infrastructure projects.

According to the commentators, municipalities that seek private-sector involvement remain motivated by common factors – in particular, the need to control costs while complying with stringent regulations.

* The Water Partnerships Report was published in March 2012, using data from 2011.